Telstra goes on the offensive against separation moves

Telstra goes on the offensive against separation moves

Telco says Government legislation is based on "erroneous assumptions" and calls for more time to negotiate

Telstra has gone on the offensive and rejected plans to split the organisation up in a submission to the Australian Senate.

The telco giant claims the Federal Government’s plan to structurally separate its wholesale and retail divisions is underpinned by “erroneous assumptions” and would “impede the achievement of the NBN”. The comments were made in a detailed 29-page submission to a Senate inquiry into the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009.

While Telstra praised the Government’s vision for a National Broadband Network (NBN), it stated the proposed bill contained factual errors and that its structural separation would reduce competition and undermine next-generation broadband services. Despite submissions officially closing on October 7, Telstra won a reprieve and was allowed to provide its input today.

“The bill will... harm consumers, particularly those in rural and remote Australia and... potentially destroy value for the about 1.4 million Australia shareholders who purchased Telstra shares from the Government over the past 12 years,” the submission stated.

“Functional separation will, for many years, divert Telstra management and resources away from migration to the NBN. At a time when Australia needs more investment in next-generation technologies, the only telecommunications company with a track record of sustained investment will be taken offline. “In reality, the problems with the current regulatory regime are far more complex than the simple view that it is ‘all Telstra’s fault’.”

Although Telstra did not reject assertions it is vertically integrated, it claimed a stronger telco provided better services.

“It reduces costs and facilitates innovation – creating benefits that can, in a properly structured access regime,” it said in the submission. “Whatever benefits functional separation may bring in the longer term, in the short to medium term it will needlessly impose costs, needlessly consume resources and needlessly disrupt customer service.”

Telstra requested the Government to entirely remove sections of the bill that called for its structural separation and HFC and Foxtel divestiture. It also proposed additions to the legislation’s moves towards functional separation.

“Add additional design principles to the functional separation principles, including… the principle that functional separation must not be unduly burdensome on Telstra and the principle that Telstra is not required to physically separate information systems or networks,” it wrote. But in a nod to pragmatism, the telco requested more time to negotiate suitable terms with the Federal Government.

“Consideration of the Bill should be deferred until after the conclusion of constructive discussions between Telstra and the Government over the NBN and the completion of the Government’s NBN Implementation Study,” it stated.

The Australian industry has been calling for Telstra’s separation for years. But while there is industry support for the Government’s decision, several ISPs have warned the process is fraught with difficulty.

You can read Telstra’s full submission to the Senate enquiry here.

You can also check out <i>ARN</i>’s timeline on the road to Telstra separation here.

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